How Are Those Steel Tariffs Working?

WSJ editorial. Excerpt:

• Trade deficit. “We need and we will get lower trade deficits, and we will stop exporting jobs and start exporting more products instead,” Commerce Secretary Wilbur Ross said last March after the President announced his steel tariffs. We disagree with the President’s preoccupation with trade deficits, which are affected more by capital flows and currency values than trade policy.

But it’s worth pointing out that the trade deficit in steel increased last year by $1 billion as exports (measured in dollars) fell 7% and imports rose 1%. Imports ton for ton fell more than exports did. But the average price of steel per ton increased more for imports than exports, perhaps due to shifts in currency values and product deliveries—e.g., businesses importing more expensive specialized steel grades.

Retaliatory tariffs by Canada and Mexico contributed to a $650 million drop in American steel exports. At the same time imports increased from Mexico and Canada, which are deeply integrated into U.S. supply chains. In many cases manufacturers paid the tariff and passed on the cost to customers.

Mr. Trump’s tariffs had a de minimis impact on Chinese imports, which were already subject to 28 dumping duties. They principally reduced imports from Turkey, Russia and South Korea, which turned around and shipped more steel to other countries.

For example, U.S. imports from Turkey fell by 930,000 tons last year. But Turkey exported 330,000 more tons to Canada and 780,000 more tons to Italy. European steel makers have complained that a flood of imports is driving down prices. But lower prices have made European manufacturers more competitive. Some U.S.-based manufacturers like Harley-Davidson have also moved production overseas to dodge retaliatory tariffs and take advantage of lower steel prices. 

• Jobs. While domestic steel production rose 5% last year, the tariffs had little impact on employment in the industry. Steel makers added 2,200 jobs in 2017, but just 200 in the last year. One reason is that steel makers ramped up production at highly-efficient minimills with electric-arc furnaces that employ few workers."